Feb 15, 2013

Vietnam - How Coca Cola gave Vietnamese partners a boot?

VietNamNet Bridge – Turning up in the Vietnamese market as a
partner in the joint ventures with Vietnamese partners, Coca Cola has given
Vietnamese partners, one after another--a boot, to become the only owner in the
enterprises.

Penetrating the Vietnamese market

Becoming a partner in the joint
ventures with Vietnamese enterprises was really a good idea for the drink giant
to penetrate the Vietnamese market easily. This was considered a jumping board
for Coca Cola to jump into the Vietnam, a promising market.

In August 1995, the first joint
venture between Coca Cola Indochina and Vinafimex was set up, headquartered in
the north.

Just three years later, another
joint venture appeared in the central region - Coca Cola Non Nuoc headquartered
in Da Nang City.

In October 1998, the government
of Vietnam turned the green light on, allowing joint ventures to undergo the
restructure to become 100 percent foreign owned enterprises. The Coca Cola
joint ventures then, one after another, fell into the hands of Coca Cola
Indochina.

The thing first happened with
Coca Cola Chuong Duong in the south. After that, in August 1999, the joint
ventures in Da Nang and Hanoi also shifted to 100 percent foreign owned ones.

In June 2001, after getting the
permission from the Vietnamese government, the three Coca Cola enterprises
merged into one, put under the management of Coca Cola Vietnam, headquartered
in Thu Duc district in HCM City.

As such, just within six years in
Vietnam, Coca Cola could do a lot of things: “getting married” and then
“divorced” with several Vietnamese enterprises.

How did the Vietnamese partners leave?

The most efficient method Coca
Cola used to weed out Vietnamese partners from the joint ventures was the
unprofitable business.

Coca Cola spent money like water,
throwing money into the noisy advertisement campaigns to fight against its
biggest rival Pepsi. The HCM City Taxation Agency has confirmed that Coca Cola
has been taking loss since the day of its official operation in Vietnam.

The consecutive loss then made
Vietnamese partners unbearable and forced them to quit the joint ventures to
escape the loss.

The first Vietnamese partner who
had to leave was Vinafimex. Sources said that Vinafimex sold its stakes to Coca
Cola at just two million dollars.

In 2001, Coca Cola Ngoc Hoi
Factory, Coca Cola Chuong Duong in Hanoi and Coca Cola Non Nuoc in Da Nang
merged into one at the permission by the Ministry of Industry. As such, a
company specializing in making and distributing soft drink products with the
investment capital of 350 million dollars was set up.

The then investment capital of
the three above said factories were 151 million, 182.5 million and 25 million
dollars, respectively. After buying all the capital contribution in the joint
ventures from Vietnamese partners, the three factories turned into 100 percent
foreign owned enterprises with the production capacity of 400 million liters
per annum.

Dr. Nguyen Van Viet, Chair of the
Brewery, Liquor and Soft Drink Association, also thinks that taking loss is the
trick played by Coca Cola to weed out the Vietnamese partners.

Meanwhile, Vo Van Quang, a
leading branding expert in Vietnam, said that taxation bodies have every reason
to have doubts that Coca Cola has made the transfer pricing, which helps it
“take loss” but still get money to expand business in Vietnam.

DDDN

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